ETD · Ethan Allen Interiors Inc.

Consolidated net sales of $135.8 million decreased 4.8% from the prior year quarter. This decline was primarily due to fewer contract sales, lower delivered unit volume, reduced available backlog, and inclement weather in January and February 2026. These factors combined with fewer incoming wholesale written orders to limit manufacturing production. Partial offsets included a higher average ticket price, incremental designer floor sample sales, and fewer sales returns, helping to cushion the revenue drop while maintaining gross margin stability.

Gross profit fell 7.6% to $80.7 million, yielding a 59.4% gross margin. The lower operating margin of 4.8% ($6.5 million operating income, down 41.1%) stemmed from fewer contract sales, reduced unit volumes, increased tariffs, elevated designer floor sample sales, and higher occupancy costs. Management mitigated these through a favorable sales mix shift, reduced freight expenses, lower headcount, disciplined spending, and higher retail average ticket pricing. In the retail segment, operating income and margin decreased due to lower net sales, reduced retail gross margin, and elevated occupancy costs, though partially offset by lower headcount and variable costs tied to softer sales.

Net income of $5.9 million (down 38.2%) and diluted EPS of $0.23 (down 37.8% from $0.37) reflected the broader profitability challenges from operating deleveraging amid revenue contraction. Despite these headwinds, cash generation remained strong, with net cash from operating activities at $30.1 million (versus $36.9 million prior year) and capital expenditures of $8.3 million (down from $9.4 million), yielding $21.8 million in free cash flow.